Memorandum of Disapproval of a Bill To Change District of Columbia Retirement Program

MEMORANDUM OF DISAPPROVAL

I am withholding my approval from H.R. 6536 which would make certain changes in the retirement program for police, firefighters, teachers and judges of the District of Columbia.

This action today in no way alters my commitment to the basic principles of fairness and self-determination which must be the cornerstone of Federal-District relations. Included among our actions to fulfill this commitment have been (1) support of full voting representation, (2) support for expansion of "Home Rule" for the District and (3) support of efforts to provide greater equity and predictability to the financial relationship between the Federal government and the District.

I have also proposed removal of the Federal government from the District's Budgetary process by 1982, as well as the development of an equitable Federal payment process on the District's revenues. This process must rest on an objective, equitable basis and not be used as a device to balance the District's budget. To achieve movement toward that goal, I recommended a Federal payment for Fiscal Year 1979 totaling $317 million—the highest total ever recommended by a President.

It is against that background that my Administration last year expressed its willingness to work with the Congress and the District to develop a sound, reasonable solution to the District's current financial difficulties with its pension program for police, firemen, teachers and judges. Previous Administrations have declined to acknowledge any Federal responsibility for the District's current pension funding problems. In the bill that passed the House of Representatives, my Administration announced its willingness to assume sixty percent of the cost of making a transition to an actuarially sound system. This would have obligated the Federal Government to make payments of $462 million over 25 years. Instead, the Congress ultimately adopted a different method of funding which identified the Federal responsibility as that portion of the unfunded liability attributable to employees who retired prior to Home Rule. This would require the Federal government to pay more than $1.6 billion over that same period.

This proposal fails to recognize that a large part of that liability derives from abuses of the disability retirement statutes which were permitted to flourish by those responsible for their effective administration. It undervalues or ignores the significance of Federal assistance through the Federal funding of benefits for thousands of District employees who participate in the Federal Civil Service Retirement System. I am therefore of the view that the enrolled bill overstates the degree of Federal responsibility.

Although the bill's benefit and disability retirement reforms are desirable, its failure to apply these reforms to current employees constitutes a serious and costly deficiency. While the bill contains a penalty clause, the purpose of which is to reduce the Federal payment if abuse persists, the application of basic statutory reforms to all employees would be a far more effective and efficient means of preventing a recurrence of the abuses which have prevailed in recent years.

Accordingly, I am compelled to withhold my approval from this bill.

I realize that many members of Congress have worked long and hard with the Administration on this question. I agree with them that there is indeed a Federal responsibility to see that this program is converted to one which is actuarially sound and which minimizes opportunity for abuse.

I look forward to working with the Congress and the elected representatives of the District of Columbia early in the next session to develop acceptable retirement funding and reform legislation. We are prepared to consider a reasonable Federal financial contribution, providing that provisions are included that fully remedy the problem of retirement abuses. Working together, I am sure we can place the District retirement programs on a sound basis in a manner which both limits the extent of Federal financial responsibility, while also recognizing the Federal responsibility in this area.

JIMMY CARTER

The White House,

November 4, 1978.